Vectra forecast meeting upbeat, but cautious

Economists speaking at the annual Vectra Bank economic forecast meeting on Wednesday were upbeat about the new year, yet each cautioned that consumers and industry were still wary of anything that could derail the progress.

Though growth in a number of sectors — employment, personal wealth, construction — from last year gives a pretty strong sense that the recession is subsiding, the dings we all experienced over the past few years are still fresh enough to keep us on edge.

“2013 was a year of records, in employment, housing, commercial real estate, the stock market,” said Patricia Silverstein, president of Development Research Partners. “But it’s indeed a delicate balance. We recognize that we’re on a major growth trend, but we’re wary since something can knock us off this balance at any point in time.”
The annual gathering gives economists a chance to prognosticate on what the new year will bring. Last year’s event showed more-than-cautious optimism. This year, things looked up much more broadly.

“The biggest decision by businesses right now is where to spend their money,” Silverstein said. “Are they ready to start growing, to add employees? They’ve been relatively cautious until now.”

Though Denver and Colorado’s economic forecast looks bright, Dr. Richard Wobbekind, associate professor of business economics and finance at the University of Colorado-Boulder, said “we’re not an island,” and are tied more to the national economy than one might expect.

“Colorado will outperform the nation in employment growth,” Wobbekind said. “But the dark cloud over the long haul is government finance. Prosperity continues into the latter part of the decade, but then the retirements kick in and that’s a force to be dealt with. Everything has a very strong balance sheet except the federal government.”

Key will be Friday’s jobs report from the federal government, he said.

“We had a bad month of data in December, with some blaming the weather,” Wobbekind said. “If we get another bad report, then the weather is off the hook and the struggle will have to be blamed elsewhere.”

A huge barrier, according to Dr. Phyllis Resnick, is the number of those under 25 years old who can’t find work, the very ones who will dictate how our economy proceeds in the future.

“It’s the 25-year-old living in your basement, out of college, with more student debt than ever before, having a harder time finding a job …. staying that way longer than before,” said Resnick, lead economist for the Colorado Futures Center at Colorado State University. “They’re not buying their first home, not getting married, not having children and moving into the economy. And we expect it to be that way for a while.”

A critical issue in how the state government will fund itself and the services it provides. How that younger generation, whom Resnick alled the “millenials,” approaches daily life will be a factor.

“They don’t behave like the rest of us do,” she said. “They don’t want to own a car, but prefer to borrow the breadbox that takes up all the parking spaces in the city; they’re cool to swap things and buy off of CraigsList and couch surf.”

She noted how the state’s sales tax revenue, a major funding mechanism, is reliant on an outdated formula based on the purchase of goods that once drove the economy.

“Today we purchase services,” she said. “It used to be that 60 cents of each dollar went to the purchase of goods, whereas by 2030 it is 28 cents. It’s simply a mismatch.”

Her solution is a change in the state sales tax approach: a tax on regular household spending, such as the barber and dog groomer.

“Younger folks won’t be spending the same and the older ones are not buying those things currently subject to the sales tax,” Resnick said. “It’s a double-whammy and the (state) general revenue fund will fall short.”

Emilie Rusch covers retail and commercial real estate for The Post. A Wisconsin native and Mizzou graduate, she moved to Colorado in 2012. Before that, she worked at a small daily newspaper in South Dakota. It's the one with Mount Rushmore.